AngloGold Ashanti Ltd., the world’s third-largest gold producer, climbed the most in seven months after the sale of its Cripple Creek & Victor mine to Newmont Mining Corp. ended speculation it would have to issue shares.
The sale of the Colorado mine for $820 million plus 2.5 percent of future gold production will reduce AngloGold’s net debt to its target level of 1.5 times earnings, Chief Executive Officer Srinivasan Venkatakrishnan told reporters Tuesday.
“We have achieved this without any dilution to shareholders and importantly it eliminates the potential equity overhang on the stock,” he said. “We have no plans to issue any equity.”
AngloGold’s aim to cut its $3.1 billion net debt had raised concerns among shareholders it may be forced to sell shares. Investors last year rejected a plan to raise equity to lower debt and split the company’s South African and foreign assets.
“We expect the asset disposal to be a positive catalyst for the stock, reducing investor concerns of a potential capital raise,” Andrew Byrne, a London-based analyst at Barclays Plc, wrote in a note.
The stock climbed as much as 10 percent, the most since Nov. 3. It was up 8.2 percent at 115.14 rand by 9:42 a.m. in Johannesburg, valuing the company at 46.8 billion rand ($3.7 billion).
Proceeds from the sale represent about a quarter of AngloGold’s market value, while the asset produced less than 5 percent of the company’s gold, Venkatakrishnan said. It also saves $200 million on capital spending in the next two years.
The money will be ringfenced for debt reduction, Finance Director Christine Ramon told reporters. While the company is leaving its options open, it will consider repaying $1.25 billion of bonds with an 8.5 percent coupon due July 2020. The bonds have a call option in July next year.
Discussions over selling AngloGold’s Sadiola asset in Mali to Iamgold Corp. are ongoing, Venkatakrishnan said.